—(1) Subject to this section, it shall not be lawful for a company (other than an exempt private company) —
to make a loan to another company; or
to enter into any guarantee or provide any security in connection with a loan made to another company by a person other than the first-mentioned company,
if a director or directors of the first-mentioned company is or together are interested in 20% or more of the total number of equity shares in the other company (excluding treasury shares).
[10/74; 15/84; 13/87; 21/2005]
(2) Subsection (1) shall extend to apply to a loan, guarantee or security in connection with a loan made by a company (other than an exempt private company) to another company where such other company is incorporated outside Singapore, if a director or directors of the first-mentioned company —
is or together are interested in 20% or more of the total number of equity shares in the other company (excluding treasury shares); or
in a case where the other company does not have a share capital, exercises or together exercise control over the other company whether by reason of having the power to appoint directors or otherwise.
[15/84; 13/87; 21/2005]
(3) For the purposes of this section —
where a company makes a loan to another company or gives a guarantee or provides security in connection with a loan made to another company, a director or directors of the first-mentioned company shall not be taken to have an interest in shares in that other company by reason only that the first-mentioned company has an interest in shares in that other company and a director or directors have an interest in shares in the first-mentioned company; and
“interest in shares” has the meaning assigned to that expression in section 7.
(4) This section shall not apply —
to anything done by a company where the other company (whether that company is incorporated in Singapore or otherwise) is its subsidiary or holding company or a subsidiary of its holding company; or
to a company, whose ordinary business includes the lending of money or the giving of guarantees in connection with loans made by other persons, to anything done by the company in the ordinary course of that business if the activities of that company are regulated by any written law relating to banking, finance companies or insurance or are subject to supervision by the Monetary Authority of Singapore.
(5) For the purposes of this section, an interest of a member of a director’s family shall be treated as the interest of the director and the words “member of a director’s family” shall include his spouse, son, adopted son, step-son, daughter, adopted daughter and step-daughter.
(6) Nothing in this section shall operate to prevent the recovery of any loan or the enforcement of any guarantee or security whether made or given by the company or any other person.
(7) Where a company contravenes this section, any director who authorises the making of any loan, the entering into of any guarantee or the providing of any security contrary to this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $20,000 or to imprisonment for a term not exceeding 2 years.